Book contents
- Frontmatter
- Contents
- List of figures
- Introduction
- Acknowledgements
- Part 1 A dream of future wealth
- Part 2 The hidden art of management
- 13 The sweet spot
- 14 Elastic bands
- 15 An offer you can't refuse
- 16 The best of both worlds
- 17 Financial Perestroika on Interstate 95
- 18 Loads of money
- 19 Checkmate
- 20 Acts of God
- 21 Acts of men
- 22 Hubble, bubble, double-entry trouble
- 23 Credit crunch conclusion
- 24 Twenty-first-century accounting
- Appendix 1 Mathematical anchor
- Appendix 2 Getting to grips with cash
- Postscript
- Bibliography
- Index
19 - Checkmate
from Part 2 - The hidden art of management
Published online by Cambridge University Press: 05 June 2014
- Frontmatter
- Contents
- List of figures
- Introduction
- Acknowledgements
- Part 1 A dream of future wealth
- Part 2 The hidden art of management
- 13 The sweet spot
- 14 Elastic bands
- 15 An offer you can't refuse
- 16 The best of both worlds
- 17 Financial Perestroika on Interstate 95
- 18 Loads of money
- 19 Checkmate
- 20 Acts of God
- 21 Acts of men
- 22 Hubble, bubble, double-entry trouble
- 23 Credit crunch conclusion
- 24 Twenty-first-century accounting
- Appendix 1 Mathematical anchor
- Appendix 2 Getting to grips with cash
- Postscript
- Bibliography
- Index
Summary
Capitalism without bankruptcy is like Christianity without hell.
Frank BormanAlmost everything is possible with an infinite overdraft. If there is no limit to the amount of money that the bank will lend you, then you can always recover from your mistakes. You also have all the time in the world to experiment with different strategies involving pricing, quality and so on.
However, in the real world of business, life is not like that. In the real world, at any particular time there is a fixed limit to the amount of cash available. If you run out of money and you need some more, there is no guarantee at all that it will be provided: indeed in general it will not.
But surely, you may say, there will be others willing to lend me money at that time? Surely there will be others who can be approached and persuaded to lend the business more money in order to tide it over this difficult period?
The problem here is that those who might be willing in principle to provide such facilities are conscious of the high level of risk involved. So the terms under which they might be prepared to lend additional funds are likely to be very onerous. Such terms might easily involve the founders of the business handing over a large number of shares, in such a way that they lose management control and overall ownership of their brainchild.
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- Chapter
- Information
- Financial Management for BusinessCracking the Hidden Code, pp. 136 - 139Publisher: Cambridge University PressPrint publication year: 2010